How the investment diamond market works

by DSC Investment

Maurizio Spoldi, CEO of DSC, Diamond Service Company, is an expert in all fields related to diamonds, including the investments in natural gems.

How does the market work?

«We are backed by a sightholder: De Beers and Alrosa extract the raw material, those two producers alone go beyond 90 percent of diamond mining in the world. These groups sell to 75 listed companies, specifically selected for moral and economic requirements, and this is the first link in the production. These two companies are responsible for selecting, cutting and placing diamonds on the market. We work closely with one of these 75 companies, and this solves the relocation problem because we sell the diamonds back to the group we bought it from: in turn, the latter [propone] worldwide at various levels, or even on the same internal market if it’s able to absorb the sale. These people serve both the jewelry industry and that of investment diamonds.

I suggest buying 0.50 or 1 carat stones because these are also in demand in the jewelry industry, and having the two possibilities to sell these stones is faster. This is the big advantage of having these giants behind for the placement».

Are there any markets that carry within themselves particular problems?

«The Indian market today partly resembles the Italian one in the Sixties and Seventies. There is a lot of haggling and professionalism is sometimes set aside at the expense of their own business. In my opinion, this is a problem because globalization now rewards, and should reward, professionalism.

Besides this, there were a few episodes related to the bad faith of people cheating others, often trying to sell synthetic diamonds as natural. It is not customary, however it is a fraud that can be perpetrated all over the world, from Italy to China. Luckily, dishonesty is not frequent. Perhaps the American market is the most transparent because it is the one that legislates most hardly against this type of situation».

What is the importance of the Chinese market, today?

«China was important for consumers until recent times, because it absorbed much of the consumes: the Chinese market replaced dollars with raw materials, especially diamonds and gold. Lately this has slowed down a little because in the last couple years it no longer had that wealth and revenue as it used to. This was one of the issues that jewelry had, because after sales had slowed down on the European and American market, China had represented a big export market.

However, China has now recovered and according to the latest reports I got, they are smong the best in the world in cutting diamonds, using lasers. India has a good quality in size but they still work a lot manually, therefore the cut is less perfect. Diamonds cut in China are extra quality. European markets are completely left out, nothing is cut in Antwerp anymore. It has however become an important partner for product entering the European market».

What is the downside of cutting manually?

«Cutting manually is now a completely outdated system: companies are equipped with lasers that go through all cutting and polishing processes and so on, so probably it is just India that uses this kind of workforce».

Does DSC cater to any sort of consumer?

«The market on our part is complete, we take care of investment diamonds, but also of clients purchasing or selling jewelry diamonds: if someone found in a relative’s security box a diamond ring, they could ask us for guidance about its value and, in case, how to monetize it. We take care of all those aspects, of the sale but we could also give suggestions for a good setting, not to get the diamond damaged in the process of creating earrings or a ring. We follow the customers at a 360 degrees angle, so that they should feel protected in all aspects regarding the final product, from a raw material we get a jewel.

We therefore cater both to the industrialist who has significant assets and wants to substantially diversify, even on diamonds, and to the family who may have 50-100 thousand euros and is not keen on leaving them in a bank or in financial investments, and seek some alternative to this. We hold courses every week, explaining advantages and disadvantages of investing in gold or diamond, just to give people alternatives: these are the only raw materials that a family, an individual, can handle. It is essential to be informed, otherwise there is a wrong approach and one can fall victim of certain situations».

What is the main point your client should take home?

«One point on which I like to insist is that these investments cannot be made by people in the first instance, they should always be done with the help of a consultant, as should be done on the traditional market. Without a minimum of training it is best to do nothing and keep money under the mattress».

How was your passion born?

«At the beginning I studied the craft of watchmaking, I was passionate about watches. Visiting various jewellers, I discovered that I was even more passionate about diamonds, so much so that since 1982 I have followed throughout this product’s supply chain: I directed the biggest gemological laboratories in Italy, I studied the sale and distribution chain, I travelled Italy throughout to see how diamonds were sold in jewelries. I therefore gathered data to understand how this wonderful product was managed.

I was angry to see that it was handled badly, especially the distribution field on the Italian market, which is the one I followed closely. Investment diamonds finally brought a transparency on this matter that jewelers, unfortunately, were not able to jump on».